Federal Reserve Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election, the New York Times reported.

Had Bernanke wanted four more years, a reelected President Obama might well have given it to him in 2014. The Bernanke-led Federal Reserve has come around to the view that stubbornly high unemployment is a big enough problem to warrant a novel and experimental approach to monetary policy. Many Republicans have mocked the Fed's open-ended bond buying program as "QEforever" or "QEternity," dismissing it as more sugar-high economics like the trillion-dollar stimulus.

But this new approach responds to Democratic complaints that the Fed has been overly fixated on the inflation part of its dual mandate to maintain both price stability and full employment.

So the more interesting question is how a President Romney would handle the Fed. Although he hasn't pledged to "end the Fed" as some tea party GOPers and Ron Paul fans desire, Romney has already stated that he wouldn't renominate Bernanke and is on record opposing the Fed's latest quantitative easing program.

His choice of economic advisers sends mixed messages. John Taylor, a monetary policy expert, is seen as an inflation hawk who would put the Fed on a more predictable policy path. Glenn Hubbard, viewed by some as the most likely Romney pick to replace Bernanke, has also been publicly critical of quantitative easing, telling Reuters earlier this year, "I don't think that's what the doctor ordered for the recovery." Then again, Hubbard said Bernanke should be given every consideration for an additional term.

Greg Mankiw is seen as the dove in the group. He has embraced the idea — one with growing popularity on the left and right — that the Fed should target a nominal GDP path, even if that means sometimes allowing inflation to rise about 2% for a period of time. As he wrote in a recent Brookings paper:

The second level of the hierarchy applies when the short-term interest rate hits against the zero lower bound. In this case, unconventional monetary policy becomes the next policy instrument to be used to restore full employment. A reduction in long-term interest rates may be sufficient when a cut in the short-term interest rate is not. And an increase in the long-term nominal anchor is, in this model, always sufficient to put the economy back on track. This policy might be interpreted, for example, as the central bank targeting a higher level of nominal GDP growth.

Would Romney ever offer up a Fed nominee who believed in NGDP targeting? I don't know, but he should. It would be a very pro-market move. Doing so would be an acknowledgement that big downturns are caused by monetary mistakes, not malfunctioning markets. Like a gold standard, it would be rules based rather than discretionary. Moreover, it might even allow for the transformation of the Fed into a passive buyer and seller of NGDP futures contracts to hit its NGDP target. Markets, not the dozen men and women of the Federal Open Market Committee, would be handling monetary policy.